Commissioner of Stamps (WA) v West Australian Trustee Executor and Agency Company Limited

The Commissioner of Stamps (WA) appealed to the High Court of Australia from a decision of the Supreme Court of Western Australia. The dispute concerned whether certain amounts of Federal income tax, assessed after the death of Mortimer Kelly, constituted "debts due by the deceased" for the purpose of calculating probate duty under the Western Australian Administration Act 1903. The executor of Mr. Kelly's estate had included these assessed taxes as deductions, a position rejected by the Commissioner.

The central legal issue before the High Court was the interpretation of the phrase "debts due by the deceased" within section 88 of the Administration Act 1903. Specifically, the court had to determine whether Federal income tax, imposed by legislation enacted during the deceased's lifetime but assessed and payable after his death, qualified as such a debt, thereby being a permissible deduction from the estate's value for probate duty purposes. This required an examination of the nature of the liability to pay income tax under the relevant Federal legislation.

A majority of the High Court, comprising Knox C.J., Higgins and Starke JJ., held that Federal income tax, even if not assessed or precisely ascertained during the taxpayer's lifetime, constituted a "debt due by the deceased" within the meaning of section 88 of the Administration Act 1903. Their reasoning was that the relevant Federal Income Tax Acts imposed a legal obligation on individuals to pay tax on income derived during their lifetime. While the assessment process determined the exact amount payable, the underlying liability to pay a sum certain, capable of being ascertained by prescribed methods, existed from the time the taxing Act came into force. This liability, they concluded, was a debt due by the deceased, notwithstanding that it became payable after his death.

The appeal was dismissed, affirming the decision of the Supreme Court of Western Australia. The majority found that the sums assessed for Federal income tax were properly deductible as debts due by the deceased when calculating the probate duty payable on his estate.